Case Study: The Fall of USA

Situation

 On August 31, 2012, USA has officially entered a national debt of $16 trillion. The currency of USD had already started to deplete while the debt continues to increase.  Foreign investments had decreased since 2008 because of the fear of inflation after the country had experienced recession.

Analysis

  The reason of the United States entering debt due the foreign consumption being more than local consumption  more imports than exports happening in the country. The US has been over-dependent on the industry production of China, where most of the products are gave to China for manufacturing and producing. 

  Over the time, China has been slowly developing into a fixed economy, with communism maintaining the low exchange rate in currency while increasing the number of foreign incomes by attracting business with the low cost production.  Annually, China’s GDP increases, improving the country’s economy.

  USA however, is a country of free economy. There is no control of businesses having manufacturing partnership with other countries due to the high currency of the country.  This had wavered local businesses away from the country, increasing the import cost of the country hence decreasing the GDP. Due to the advancement of the country, US is slowly transforming into a consumer country. With the amount of expenditures used, it is out of the country’s reach to also focus on the development and the welfare of the people in the country.

  The retrieval of foreign investments had also worsened the conditions in the United States economy. Investors have doubts in the unstable economy infrastructure of the country, transferring their investments to more stable countries.

 

  The sudden loss of money had increased the debt of the country due to the unchanging habits of consumption of the people and businesses. Although it is impossible for the country to go bankrupt as they are allowed to print any amount of money they want, but if this continues on, US will be forced to print more money causing seignoirage, the loss of value of a country’s currency, until it becomes valueless.